MBS’s Social And Economic Reform

Saudi Arabia’s Crown Prince Mohammed bin Salman, widely known by his initials MBS, has been the mastermind behind some of the country’s most fundamental social and economic transformations. After quickly emerging to power, the 32-year-old has implemented a series of revolutionary policies that aim at building a “moderate” Saudi Arabia.

Social Reforms

One of his most notable reforms is allowing women in Saudi Arabia the right to drive and greater access in workplace. This is something we take for granted in life. However, to Saudi women, this is the wildest dream come true. It certainly marks a significant step forward for Saudi Arabia which is long known for its prejudice against women.

The social reform has positive economic implications. Consumer spending by newly employed women is expected to spur the otherwise gloomy economy. Last year, Saudi Arabia’s economy registered the first-ever negative growth for the first time in close to a decade. With women entering the workforce, many predict that income of a typical Saudi household could double. Allowing women to drive will also give auto parts and related industries a boost in the long run. However, in the short run, women drivers may displace foreign chauffeurs and accelerate the drop in immigrant workers which some believe may hurt the economy. Number of foreigners employed declined by 466,000 in 2017, down from 10.88 million in 2016. In contrast, local workforce increased by 102,000. Among them, two thirds are women. Female participating in the workforce stands at 19 per cent in Saudi Arabia, still much lower as compared with 55 per cent in many Western countries. However, with the various incentives to encourage women to work and firms to employ women, I believe there will be more and more women contributing to the Saudi economy in future.

In consultation with your economics tutor in the economics tuition class, explain the various positive and negative economic implications of this move. Sign up for economics tuition with a reputable economics tutor today if you have difficulty in applying the economics concepts you have learnt in this case study. Economics Cafe Learning Centre is one of the best economics tuition centres in Singapore. Located in the vicinity of Bishan MRT Station, the centre is headed by its Principal Economics Tutor Mr Edmund Quek. Mr Quek is a well sought after economics tutor with decades of experience in teaching A-Level economics tuition.

The Saudi prince has also relaxed control on entertainment. Earlier this year, a ban on cinemas was lifted, as part of a campaign to overturn conservative social norms and encourage Saudis to seek entertainment from home. Plans about a theme park and a complex of resorts have been announced which involve multi-billion dollars of investment from the government. The return is estimated at eight per cent of household spending, equivalent to US$20 billion per year.

Economic Reforms

In contrast with his success in social reforms, a series of economic reforms launched by MBS to reduce Saudi Arabia’s dependence on oil and diversify its economy have reaped little. Revenue from oil currently accounts for 30 to 50 per cent of Saudi Arabia’s GDP. Firstly, MBS’s strategy to allow oil prices to fall in order to weed out high-cost producers failed. A recent attempt to support oil prices with coordinated production cuts proved to be unsuccessful too. Secondly, plans to boost private investment in non-oil sectors are unable to achieve their expected results, mainly due to red tapes and legal uncertainties. Recent data showed that private lending in Saudi Arabia decreased for a consecutive 13 months, casting a grim shadow over the Saudi prince’s ambitious economic reform plans. Applying economic concepts you have learnt in economics tuition from your economics tutor, explain why MBS sees the urgency for Saudi Arabia to steer away from an oil-reliant economy.

On the bright side, the move to offer tourist visa will have a positive impact across various sectors. This is the first time the Middle Eastern country opens its doors to tourists from all over the world. Previously, Visas were restricted to business travel, religious pilgrims and resident workers with their dependents. This, coupled with upcoming theme park and resorts to enhance its tourist appeal is expected to generate US$47 billion in annual tourism spending by 2020.

In closing, reactions to MBS’s ambitious social and economic reform plans, known as Saudi Vision 2030 are mixed. Some applaud the Saudi prince’s courage and far sight while others question its feasibility. It is too early for us to draw a conclusion now as a major and overarching reform like this will take years to take effect, if not decades.

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